Bitcoin's comeback: should Western Union be afraid?

http://arstechnica.com/tech-policy/news/2011/12/bitcoins-comeback-should-western-union-be-afraid.ars

by evo_9 • 15 years ago

86 76 15 years ago

onemoreact• 15 years ago

30 billion is a rounding error in world finance so saying you need sound fundamentals to back up a currency worth 30 million for a month after a crash is silly. Bitcoins's apparent stability over the last month simply means people are not willing to sell them for less than 1/10th of what they where worth a few months ago which may or may not be rational but means little.

Helianthus• 15 years ago

>This presents a bit of a puzzle for Bitcoin skeptics.

Uh, no, it presents absolutely no puzzle at all for those of us who believe Bitcoin will follow a boom-bust cycle without ever providing a truly stable currency.

schraeds• 15 years ago

Wonder what will last longer, the euro or bitcoin.

bunderbunder2• 15 years ago

I don't think that's an analogy you really want to draw.

The Euro's current problems are due to governments with Euro-denominated debt being unable to take the easy way out of servicing their debt by printing money. One of Bitcoin's defining features is that it's impossible for governments to devalue the currency by just printing money.

Since both currencies behave the same way in this regard, a Bitcoin economy would feature the exact same Achilles heel that is causing such trouble for the Eurozone right now.

creativeembassy2• 15 years ago

I would wager the bitcoin. I can't believe the euro will last that much longer. Bitcoin's downfall of not being tied to any other currency or institution is also a huge reason to adopt it for the same reason. Because code and ideas behind it are so solid, it won't ever completely lose value. It just needs to stabilize. I can't say the same for the Euro.

gweinberg• 15 years ago

If Bitcoin were nothing but the pyramid scheme its detractors say it is, it should not have recovered. Collapsed pyramids don't reassemble themselves.

Steko• 15 years ago

There are various groups of Bitcoin detractors and to lump all of them into one is a pretty clear straw man.

fennecfoxen• 15 years ago

My preferred quip is that Bitcoin isn't a pyramid scheme. Technically, it's a 'pump-and-dump'. ;)

nextparadigms• 15 years ago

I wouldn't say never, but I agree there will be smaller booms and busts for a while, at least until all 21 million Bitcoins are made so there is no more mining, and until Bitcoins starts to be used in regular stores.

JohnTHaller• 15 years ago

No.

Next question, please.

vlasta2• 15 years ago

Bitcoin's design (limited amount of coins) attracts the wrong kind of people - investors and speculators - there is no wonder the "value" is fluctuating heavily.

A real virtual currency must attract buyers and sellers of actual goods, not just get-rich-quick speculators. Maybe an easy change to the way bitcoins are mined would be enough to get it on the right track. If the amount of coins is determined democratically and not by a magic constant (chosen by the programmer God), things could be different...

moonchrome• 15 years ago

Volatility is high because of low market depth and low liquidity, if the market had a billion dollars in small players it wouldn't be very volatile.

dublinclontarf• 15 years ago

Having investors is a bad thing now?

bunderbunder2• 15 years ago

I can't dispute the author's concession that falling 90% against the dollar in a short period of time is a sign of an unstable currency.

On the other hand, I most heartily dispute the author's assertion that rising 90% against the dollar in a month is a sign of a stable currency.

DTanner3• 15 years ago

I really like the concept of "metacurrency" that this article talks about. This is exactly the area I think Bitcoin will be most successful. I don't ever see it replacing the dollar, or even credit cards. The one thing that Bitcoin really excels at is the instantaneous transfer of unlimited amounts of money from one place in the world to another. Rick Falkvinge talks about this a bit in his "four drivers" series: http://falkvinge.net/2011/06/18/bitcoins-four-drivers-part-t...

I think eventually Bitcoin will compete with (or maybe replace) Paypal/Dwolla. But its killer app is long-distance point-to-point money transfer.

joezydeco2• 15 years ago

Not sure why you're getting downvoted for this, especially since this is the main idea of the article.

So what's to keep a loose network of independent merchants from popping up around the globe to undercut Western Union?

DTanner3• 15 years ago

> Not sure why you're getting downvoted for this

There's a portion of internet users who have decided that they really really hate Bitcoin and go out of their way to denigrate it and downvote anyone who doesn't share their views. I can understand the people who are skeptical, because Bitcoin definitely has its problems, but this seething hatred mystifies me...

wmf• 15 years ago

That already exists: http://en.wikipedia.org/wiki/Hawala I'm a little surprised the article didn't mention this.

freehunter• 15 years ago

Problem is, PayPal et al work in government-backed currencies. You can expect that when someone pays you $1 over PayPal, you'll get $1 worth from it (regardless of how many Euros you'd get for that dollar). However, with Bitcoins you'd be running into the issue of a double exchange. First you'd have to trade your dollars for Bitcoins, transfer the Bitcoins, then trade them back into dollars. You'll always get 1BC when someone sends you 1BC, but from the time that BC is bought to the time it's converted back to dollars, the currency could be worth a lot more (or a lot less).

Dollars are not inherently better, but at least I can immediately spend one and get a soda from the gas station. Until Bitcoin reaches that point, people will be sending dollars over Paypal.

DTanner3• 15 years ago

That's why I said "eventually", the user-base isn't quite there yet. I could see people just keeping $50-$100 in Bitcoin permanently to use for small transactions, much like I always have $100-$200 in cash in my wallet for small purchases, or $1000-$3000 in my bank account just as a buffer.

I don't see that happening anytime soon though with the huge volatility.

weavejester2• 15 years ago

Needing two exchanges instead of one is a disadvantage in the short term, but a big advantage in the long run, because the receiver of money can whatever exchange they prefer, rather than they expect to be most popular with their audience. In essence, Bitcoin is an open protocol for electronically transferring wealth.

georgemcbay2• 15 years ago

"The one thing that Bitcoin really excels at is the instantaneous transfer of unlimited amounts of money from one place in the world to another."

I'm being somewhat pedantic here but Bitcoin is absolutely terrible at this, because Bitcoins are inherently not unlimited.

On a less pedantic note, I'm not sure Bitcoin is any better than the alternative of a Bitcoin-free world for your example usage. Lots of "real" US Dollars these days are little more than bits in a database that can be transferred easily across the world, and that's true with or without Bitcoin.

omarchowdhury2• 15 years ago

Bitcoins are inherently unlimited - they can be divided down to 8 decimal places for a total of 2.1 quadrillion units.

Kittynana• 15 years ago

I don't have much to add that hasn't been said in the other comments here, but a currency with a "market capitalization" of $30 million can never be stable. A single wealthy person could easily move the market a significant percentage.

joshu2• 15 years ago

Articles that end in question marks are universally answered "no".

kirubakaran• 15 years ago

Someone should write an article: 'Are articles that end in question marks universally answered "no"?'.

joshu2• 15 years ago

The Halting Problem: Thought Experiment or The End of Computer Science?

thinkcomp3• 15 years ago

I think Western Union is probably more afraid of lawsuits that seek to invalidate its protectionist legislation.

http://dockets.justia.com/docket/california/candce/5:2011cv0...

daeken2• 15 years ago

You've managed to post in nearly every thread related to money changing hands for the past couple months. While I applaud your persistence, the world does not center around you, your startup, your causes, etc. It's incredibly irritating, it's off-topic in effectively every case, and it does nothing to promote healthy conversation.

thinkcomp3• 15 years ago

Sorry you feel that way. Obviously I don't think the world revolves around me. As for relevance and usefulness in terms of discussion, I clearly disagree on all counts, otherwise I wouldn't post.

According to the article, Bitcoin's significance is that it "allows low-cost and regulation-free transfer of wealth." I am seeking to achieve many of the same objectives in the context of a high-cost and poorly regulated environment, just in a different manner. As it so happens, that manner might impact the legality of some uses of Bitcoin.

Furthermore, behind the shadow of its lobbying group, Western Union is one of the main sponsors of the legislation directly in question that it and other companies use to maintain an oligopoly. No one else seems to be discussing that point, though it seems rather significant, both in terms of Bitcoin and other startups wishing to enter the market.

zotz• 15 years ago

There's nothing wrong with someone buying a WoW character and then selling it at a profit later.

Bitcoin is the same principle, more or less. It's an unreal, digital commodity that might or might not have value, depending on the perceiver. That bitcoins even exist are proof to me of the human ability to create and recreate stores and transfers of value, no matter how ridiculous those stores may seem to some:

http://www.wondermondo.com/Countries/Au/MicronesiaFS/Yap/Rai...

jl6• 15 years ago

Bitcoin now is like the internet was in 1985. There is a huge stack of infrastructure yet to be built in order to deliver on the early pre-hyped promises. I don't think anybody understands this domain well enough to predict the outcome; it's very clearly in an experimental phase. It may well be ridiculous to believe Bitcoin will replace the dollar (much as some believed the internet would replace all manner of things which still happily co-exist), but surely more ridiculous to dismiss it when the experiment has barely begun.

creativeembassy2• 15 years ago

This is a neat analogy. The biggest hurdle to using Bitcoins now is the (lack of) ease of use. There's a potential startup culture here that takes transaction fees from Bitcoins, and presents them in a easier formats to use and transfer. Once that problem is solved (and the adoption of the internet had to solve the exact same problems), then the audience will follow.

GFischer2• 15 years ago

I disagree. The biggest hurdle is that the use of Bitcoins as currency probably either already is or will be made illegal.

In my country I'm pretty certain it's already illegal (there are some provisions regarding electronic currency). It's even worse in countries with exchange controls (like Argentina).

Edit: our laws are so badly redacted that Linden Dollars, Facebook Coins and all that are probably illegal as well, but nobody cares, unless they get popular. The fun of selectively enforced laws ...

lmm2• 15 years ago

To compare with the internet is to compare with the 1% of these kind of ideas that actually succeeds. To me it feels a lot more about the Second Life hype of the early 2000s - we heard stories about people paying millions of dollars for "virtual land", companies held events there, some people were saying it would be the next internet and at the same time a horde of detractors were saying it was all pointless. And then it gradually just faded from view.

ajb• 15 years ago

The article suggests that government can't get rid of bitcoins. But given the upper limit on the number, couldn't the government simply buy them all?

burgerbrain• 15 years ago

They can only buy those that people are willing to sell. Theoretically they could do it, but the act of buying all of them would likely make many people rather rich.

And then once they did it, people could just start a new chain anyway.

gleetree3• 15 years ago

And how will they buy them? If they started buying them all the price would skyrocket and people would be more likely to hold onto them. And which government? The Chinese, The Russian the US? We'd see all nations suddenly rushing to buy bitcoins, and I'd be a billionaire.

ajsharp• 15 years ago

I haven't read the article, but I think I can surmise the correct answer from reading the title: No.

rauljara• 15 years ago

I share your skepticism of bit coin. But if you haven't read the article, don't comment.

Smirnoff• 15 years ago

Western Union (Business Services) employee here.

I disagree with the author on many levels:

1. Government regulations. Wire transfer industry is a HIGHLY regulated industry. There is no way BitCoin will be able to operate without complying with AML (AntiMoney Laundering) and AntiTerrorist regulations. Many names/countries/organizations are on OFAC list. Thus, the minute you transfer a wire to Mohammad or to someone in Iran it raises a flag and you will spend days if not weeks investigating. Note: I didn't even mentioned all the licences that you need to obtain.

2. FX transfers. Author mentioned transferring bitcoin to India and getting rupees. It's not that easy. Foreign Exchange transfers depend on day of transfer. Thus, waiting or talking to a qualified trader may save you money. This takes time and people. Not sure how bitcoin (1 currency) can solve the process that requires 2 currencies.

3. There are MANY other services that provide better and faster solutions to transfer funds internationally. We were one of them and got acquired by Western Union :)

Finally, bitcoin is a currency. Western Union is a service. That brings us to the major flaw of the article. Western Union facilitates the transfer, while bitcoin is just a medium. WU already uses medium to "transfer" the wires. It's called SWIFT.

gleetree3• 15 years ago

I've transferred several thousand dollars worth of bitcoins in the last few weeks to a Chinese bank account - the exchange I bought them on didn't know what I wanted the bitcoins for. And the Chinese exchange I sold them on didn't know where I got them from. The act of buying the bitcoins contains no information about their future use. The fees were much lower than Western Union, and since Bitcoin prices are volatile I actually made money on most of the transfers. Bitinstant.com already allows you to send money to anyone in the world using paypal via bitcoin anonymously.

Edit - the point is that bitcoin makes it possible for individuals or small companies to move funds to virtually anywhere in the world. A big multinational corporation facilitating this becomes unnecessary. At some point it will occur to people just to move the bitcoins and not bother converting them to a local currency.

maaku• 15 years ago

I don't think you understand what bitcoin is...

The point (mentioned in the article) is that while such regulation does exist, there's absolutely no way to apply it to bitcoin, if used properly.

jbm• 15 years ago

I'm guessing you didn't meant to come off as bigoted but I have a lot of friends named Mohammad, none of whom have any legal issues, nor are any of them members of terrorist organizations. If the attitude towards me sending money to one of them for any number of legitimate reasons is baseless suspicion, maybe many people like me will wind up looking for alternatives - like bitcoin.

At the expense of karma, allow me to add that in an odious legal atmosphere where prosecutors consider photographing chicken coops as terrorism, it won't just be people with funny terrorist-sounding names winding up using Bitcoin.

GFischer2• 15 years ago

I'm not the poster, but I also work for a regulated industry, and I have to comply with those regulations, which I certainly don't agree with (and even campaigned against). I also guess that Smirnoff didn't mean it that way either.

So, it's probably not Western Union who's to blame when sending money to Mohammed (or José Rodriguez which is an extremely common name here) is a big hassle for all parties involved, it's the regulators. The only thing WU can be blamed for is for working within the rules. It's not bigotry by WU.

As he said, if services start providing money transfers (using Bitcoin or whatever) without complying with regulations, they'll probably will have to be based somewhere outside the US's influence, and will eventually be blocked and impeded in the US (see: online poker, only worse)

makomk• 15 years ago

Of course, right now Bitcoin also serves a fraction of the number of countries that Western Union does. Basically, unless you're in Europe, North America or Australia you almost certainly don't have any way of exchanging money for Bitcoins. Even with Bitcoin only available to a limited number of countries, AML regulations are causing problems for users already.

gerggerg3• 15 years ago

What's kind of crazy to me is that people don't think that if bitcoin really gets successful companies like paypal, visa, google etc. won't just come out with their own 'coins' backed by more user friendly software and possibly other incentives while maintaining anonymity.

jQueryIsAwesome• 15 years ago

Big corporations are in the inverse business of anonymity, they don't even want you to have a nickname (Google+?) and they want to get all the information they can from you (what you like, your address, etc). Plus, they have to respond to the US government/law.

So i don't think someone would trust anonymity to any of those big corporations.

gerggerg3• 15 years ago

'cept for the clever marketing.

gleetree3• 15 years ago

These are all centralized companies - if they go out of business what happens to your money? What if the company decides to print more of this money for itself? Napster went out of business becasue the government shut it down. Bittorrent is still going strong. Bitcoin is p2p like bittorent. There is no central point of failure.

gerggerg3• 15 years ago

'Cept it being replaced by something more useful.

mrb2• 15 years ago

"The original run-up in prices could easily be explained as a speculative bubble, and the subsequent decline as the popping of that bubble. But if that were the whole story, then the value of Bitcoins should have continued to decline"

What a stupid statement to make. By definition, a bubble grows, then bursts, then things are back to normal. Similarly, the stock market did not indefinitely continued to decline after the dot com bubble... It is like the author is saying "the price of this stock should decline in the future because it has declined in the past".

binarybits• 15 years ago

Stocks are valuable because they're a claim on a stream of future dividends. Bitcoins, in contrast produce no dividends and aren't intrinsically useful. So the question is why are they valuable at all?

Also, the name-calling isn't necessary.

mrb2• 15 years ago

That's not the reason stocks have value. For one thing, many stocks don't return dividends. They are valuable because legally a stock owner owns a piece of the company, therefore a piece of its assets (and future revenus which will help grow its future assets.)

Secondly, Bitcoin's decentralized nature, unfrozable assets, etc, is inherently valuable because unmatched by any other system.

Bitcoin's comeback: should Western Union be afraid?

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